Federal

USA Workforce Tax Credit Act

Source: Congress.gov · 2,573 words in original text

What This Bill Does

This bill creates two tax credits for people and businesses who donate money to nonprofit organizations that provide job training and apprenticeship programs. The bill also requires these training organizations to spend most of the money they receive on actual training rather than overhead costs.

Who It Affects

Individual taxpayers who make charitable donations, corporations who make charitable donations, nonprofit organizations that provide workforce development and apprenticeship training, and eligible participants enrolled in these training programs.

Key Provisions

• Individuals can claim a tax credit equal to their donations to eligible training organizations, up to 25 percent of their tax bill with a maximum credit of $250,000 per year (Sec. 2(a)(1)) • Corporations can claim a similar tax credit for donations to eligible training organizations, up to 25 percent of their tax bill with a maximum credit of $250,000 per year (Sec. 2(b)(1)) • Training organizations receiving donations must distribute at least 90 percent of their annual receipts for training within specific timeframes, or they face a 15 percent tax penalty on undistributed amounts (Sec. 2(c)(1)) • Participating organizations must comply with all state laws including those covering discrimination, health and safety, and criminal background checks (Sec. 2(a)(1)) • Eligible organizations include community colleges, workforce training programs, career and technical education providers, union-operated apprenticeships, community organizations with certified training, and private schools offering diplomas or degrees (Sec. 2(a)(1))

What Changes

If this becomes law, people and businesses can reduce their federal taxes by donating to nonprofit job training organizations. A total of $2 billion in tax credits will be available each year starting in 2024, distributed on a first-come, first-served basis. Training organizations that receive these donations will be required to spend at least 90 percent of their funds on actual training activities within required timeframes.

Important Definitions

"Qualified contribution" means a charitable donation to a workforce development or apprenticeship training organization. "Workforce development or apprenticeship training organization" means a nonprofit organization exempt from taxes that provides job training and apprenticeships to eligible participants, or provides scholarships for such training. "Eligible participant" means a person enrolled in one of these training organizations. "Administrative expenses" may not exceed 10 percent of total receipts for any organization.

Effective Date

The amendments made by this Act shall apply to taxable years beginning after December 31, 2023 (Sec. 2(c)(1)).

I 118TH CONGRESS 1ST SESSION H. R. 1656 To amend the Internal Revenue Code of 1986 to allow a credit against tax for charitable donations to nonprofit organizations providing work- force training. IN THE HOUSE OF REPRESENTATIVES MARCH 17, 2023 Mr. SMUCKER introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to allow a credit against tax for charitable donations to nonprofit organizations providing workforce training. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘USA Workforce Tax 4 Credit Act’’. 5 SEC. 2. TAX CREDIT FOR CONTRIBUTIONS TO WORKFORCE 6 DEVELOPMENT AND APPRENTICESHIP 7 TRAINING ORGANIZATIONS. 8 (a) CREDIT FOR INDIVIDUALS.— 9 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 1656 IH (1) IN GENERAL.—Subpart A of part IV of sub- 1 chapter A of chapter 1 of the Internal Revenue Code 2 of 1986 is amended by inserting after section 25E 3 the following new section: 4 ‘‘SEC. 25F. QUALIFIED WORKFORCE DEVELOPMENT AND 5 APPRENTICESHIP TRAINING PROGRAMS. 6 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in- 7 dividual, there shall be allowed as a credit against the tax 8 imposed by this chapter for the taxable year an amount 9 equal to the amount of qualified contributions made by 10 the taxpayer during the year. 11 ‘‘(b) DOLLAR LIMITATIONS.— 12 ‘‘(1) INCOME LIMITATION.—The amount al- 13 lowed as a credit under subsection (a) with respect 14 to any taxpayer shall not exceed 25 percent of the 15 tax liability of the taxpayer with a maximum value 16 of $250,000. 17 ‘‘(2) REDUCTION BASED ON STATE CREDIT.— 18 The amount allowed as a credit under subsection (a) 19 for a taxable year shall be reduced by the amount 20 allowed as a credit on any State tax return of the 21 individual for qualified contributions made by the 22 taxpayer during the taxable year. 23 ‘‘(c) QUALIFIED CONTRIBUTIONS; OTHER DEFINI- 24 TIONS.—For purposes of this section— 25 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 1656 IH ‘‘(1) QUALIFIED CONTRIBUTION.—The term 1 ‘qualified contribution’ means a charitable contribu- 2 tion (as defined by section 170(c)) to a workforce 3 development or apprenticeship training organization. 4 ‘‘(2) WORKFORCE DEVELOPMENT OR APPREN- 5 TICESHIP TRAINING ORGANIZATION.—The term 6 ‘workforce development or apprenticeship training 7 organization’ means any organization— 8 ‘‘(A) which— 9 ‘‘(i) is described in section 501(c)(3) 10 and exempt from tax under section 501(a), 11 and 12 ‘‘(ii) is not a private foundation, 13 ‘‘(B) the exclusive purpose if which is— 14 ‘‘(i) to provide workforce development 15 and apprenticeship training to eligible par- 16 ticipants, including— 17 ‘‘(I) community colleges, 18 ‘‘(II) workforce training pro- 19 grams, as defined by State workforce 20 agencies, 21 ‘‘(III) organizations that provide 22 career and technical education, 23 ‘‘(IV) organizations that provide 24 training or apprenticeships operated 25 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 1656 IH by a collective bargaining organiza- 1 tion, 2 ‘‘(V) community organizations 3 that provide full certified training, 4 and 5 ‘‘(VI) private schools that confer 6 diplomas, degrees, or certify comple- 7 tion of certain grades, or 8 ‘‘(ii) to provide scholarships for use in 9 obtaining workforce development and ap- 10 prenticeship training described in clause (i) 11 at an organization which is exempt from 12 tax under section 501(a) (other than a pri- 13 vate foundation), and 14 ‘‘(C) that is in compliance with all applica- 15 ble State laws, including laws relating to unlaw- 16 ful discrimination, health and safety require- 17 ments, and criminal background checks of em- 18 ployees. 19 ‘‘(3) ELIGIBLE PARTICIPANTS.—The term ‘eli- 20 gible participant’ means an individual who is en- 21 rolled in a workforce development and apprentice- 22 ship training organization, as described in paragraph 23 (2)(B). 24 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 1656 IH ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 1 shall be allowed under any provision of this chapter for 2 any expense for which a credit is allowed under this sec- 3 tion. 4 ‘‘(e) ELECTION.—This section shall apply to a tax- 5 payer for a taxable year only if such taxpayer elects to 6 have this section apply for such taxable year. 7 ‘‘(f) APPLICATION OF VOLUME CAP.—A contribution 8 shall be taken into account under this section only if such 9 contribution is recognized by the Secretary as applying 10 against the volume cap established under section 4 of the 11 USA Workforce Tax Credit Act.’’. 12 (2) CLERICAL AMENDMENT.—The table of sec- 13 tions for subpart A of part IV of subchapter A of 14 chapter 1 of such Code is amended by inserting 15 after the item relating to section 25E the following 16 new item: 17 ‘‘Sec. 25F. Qualified Workforce Development and Apprenticeship Training Pro- grams.’’. (b) BUSINESS CREDIT.— 18 (1) IN GENERAL.—Subpart D of part IV of 19 subchapter A of chapter 1 of such Code is amended 20 by adding at the end the following new section: 21 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 1656 IH ‘‘SEC. 45BB. CONTRIBUTIONS TO WORKFORCE DEVELOP- 1 MENT OR APPRENTICESHIP TRAINING ORGA- 2 NIZATIONS. 3 ‘‘(a) GENERAL RULE.—For purposes of section 38, 4 in the case of a corporation, the workforce development 5 and apprenticeship training credit determined under this 6 section for the taxable year is the aggregate amount of 7 qualified contributions for the taxable year. 8 ‘‘(b) LIMITATION.— 9 ‘‘(1) INCOME LIMITATION.—The amount of the 10 credit determined under this section for any taxable 11 year shall not exceed the lesser of— 12 ‘‘(A) 25 percent of the tax liability of the 13 taxpayer for the taxable year, and 14 ‘‘(B) $250,000. 15 ‘‘(2) REDUCTION BASED ON STATE CREDIT.— 16 The amount allowed as a credit under subsection (a) 17 for a taxable year shall be reduced by the amount 18 allowed as a credit on any State tax return of the 19 individual for qualified contributions made by the 20 taxpayer during the taxable year. 21 ‘‘(3) QUALIFIED CONTRIBUTIONS.—For pur- 22 poses of this section, the term ‘qualified contribu- 23 tion’ has the meaning given such term under section 24 25F. 25 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 1656 IH ‘‘(c) DENIAL OF DOUBLE BENEFIT.—No deduction 1 shall be allowed under any provision of this chapter for 2 any expense for which a credit is allowed under this sec- 3 tion. 4 ‘‘(d) ELECTION.—This section shall apply to a tax- 5 payer for a taxable year only if such taxpayer elects to 6 have this section apply for such taxable year. 7 ‘‘(e) APPLICATION OF VOLUME CAP.—A contribution 8 shall be taken into account under this section only if such 9 contribution is recognized by the Secretary as applying 10 against the volume cap established under section 4 of the 11 USA Workforce Tax Credit Act.’’. 12 (2) CONFORMING AMENDMENTS.—Section 13 38(b) of such Code is amended by striking ‘‘plus’’ at 14 the end of paragraph (40), by striking the period 15 and inserting ‘‘, plus’’ at the end of paragraph (41), 16 and by adding at the end the following new para- 17 graph: 18 ‘‘(42) the workforce development or apprentice- 19 ship training credit determined under section 20 45BB(a).’’. 21 (3) CLERICAL AMENDMENT.—The table of sec- 22 tions for subpart D of part IV of subchapter A of 23 chapter 1 of such Code is amended by adding at the 24 end the following new item: 25 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 1656 IH ‘‘Sec. 45BB. Contributions to workforce development or apprenticeship training organizations.’’. (c) EXCISE TAX ON FAILURE OF SCHOLARSHIP 1 GRANTING ORGANIZATIONS TO MAKE DISTRIBUTIONS.— 2 (1) IN GENERAL.—Chapter 42 of such Code is 3 amended by adding at the end the following new 4 subchapter: 5 ‘‘Subchapter I—Organizations Providing 6 Workforce Development or Apprentice- 7 ship Training 8 ‘‘Sec. 4969. Tax on failure to distribute receipts. ‘‘SEC. 4969. TAX ON FAILURE TO DISTRIBUTE RECEIPTS. 9 ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 10 on the failure of a workforce development or apprentice- 11 ship training organization (as defined in section 25F(c)) 12 to make distributions in any taxable year in an amount 13 equal to or in excess of the required distribution amount 14 before the distribution deadline relating to a taxable year. 15 ‘‘(b) AMOUNT OF TAX.—The tax imposed by sub- 16 section (a) with respect to a taxable year shall be equal 17 to 15 percent of the excess (if any) of— 18 ‘‘(1) the required distribution amount with re- 19 spect to the taxable year, over 20 ‘‘(2) the amount of receipts of the workforce de- 21 velopment or apprenticeship training organization 22 for each taxable year which are distributed before 23 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 1656 IH the distribution deadline with respect to such re- 1 ceipts. 2 ‘‘(c) DEFINITIONS.—For purposes of this section— 3 ‘‘(1) REQUIRED DISTRIBUTION AMOUNT.— 4 ‘‘(A) IN GENERAL.—The required distribu- 5 tion amount with respect to a taxable year is 6 the amount equal to 100 percent of the total re- 7 ceipts of the workforce development or appren- 8 ticeship training organization for such taxable 9 year— 10 ‘‘(i) reduced by the sum of such re- 11 ceipts that are retained for administrative 12 expenses for the taxable year or are carried 13 to the succeeding taxable year under sub- 14 paragraph (C), and 15 ‘‘(ii) increased by the amount of the 16 carryover under subparagraph (C) from 17 the preceding taxable year. 18 ‘‘(B) ADMINISTRATIVE EXPENSES.—For 19 purposes of this paragraph, not more than 10 20 percent of total receipts of a qualified workforce 21 development or apprenticeship training organi- 22 zation for a taxable year may be used for ad- 23 ministrative purposes. 24 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 1656 IH ‘‘(C) CARRYOVER.—Receipts of a qualified 1 workforce development or apprenticeship train- 2 ing organization that are not disbursed for the 3 taxable year or retained for administrative pur- 4 poses for the taxable year shall be carried to 5 the succeeding taxable year. The amount car- 6 ried to the taxable year under the preceding 7 sentence shall not exceed 15 percent of total re- 8 ceipts of the qualified workforce development or 9 apprenticeship training organization for the 10 taxable year. 11 ‘‘(2) DISTRIBUTIONS.—The term ‘distribution’ 12 includes amounts which are formally committed but 13 not distributed. A formal commitment described in 14 the preceding sentence may include contributions set 15 aside for eligible students or participants for more 16 than one year. 17 ‘‘(3) DISTRIBUTION DEADLINE.—The distribu- 18 tion deadline with respect to receipts for a taxable 19 year is the first day of the second taxable year fol- 20 lowing the taxable year in which such receipts are 21 received by the scholarship granting organization. 22 ‘‘(d) REASONABLE CAUSE EXCEPTION.—The tax im- 23 posed by subsection (a) shall not apply with respect to any 24 failure to make required distributions before the distribu- 25 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 1656 IH tion deadline which is not willful and is due to reasonable 1 cause.’’. 2 (2) ABATEMENT OF TAX.— 3 (A) GENERAL RULE.—Subsection (b) of 4 section 4962 of such Code is amended by strik- 5 ing ‘‘or G’’ and inserting ‘‘G, or I’’. 6 (B) FIRST TIER TAX.—Subsection (a) of 7 section 4963 of such Code is amended by in- 8 serting ‘‘4969,’’ after ‘‘4967,’’. 9 (C) TAXABLE EVENT.—Subsection (c) of 10 section 4963 of such Code is amended by in- 11 serting ‘‘4969,’’ after ‘‘4967,’’. 12 (3) CORRECTION PERIOD.—Subparagraph (A) 13 of section 4963(e)(2) of such Code is amended by in- 14 serting ‘‘or 4969’’ after ‘‘4942’’. 15 (4) CLERICAL AMENDMENT.—The table of sub- 16 chapters for chapter 42 of such Code is amended by 17 adding at the end the following new item: 18 ‘‘SUBCHAPTER I. ORGANIZATIONS PROVIDING WORKFORCE DEVELOPMENT, APPRENTICESHIP TRAINING, OR SCHOLARSHIPS’’. (c) EFFECTIVE DATE.—The amendments made by 19 this Act shall apply to taxable years beginning after De- 20 cember 31, 2023. 21 SEC. 3. ORGANIZATIONAL AUTONOMY. 22 A participating eligible organization or entity under 23 the programs established pursuant to this Act are autono- 24 VerDate Sep 11 2014 02:09 Mar 30, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1656.IH H1656 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 1656 IH mous and not agents of the State or Federal Government 1 and therefore— 2 (1) a Federal or State agency may not in any 3 way regulate the program of a participating entity 4 that accepts a contribution under this Act; 5 (2) the provision of tax credits under this Act 6 does not expand the regulatory authority of the Fed- 7 eral Government, the State, its officers, or any 8 school district to impose any additional regulation of 9 an entity beyond those necessary to enforce the re- 10 quirements of this Act; and 11 (3) participating eligible entities shall be given 12 the maximum freedom to provide for the needs of 13 their participants without government control. 14 SEC. 4. VOLUME CAP. 15 (a) AMOUNT.—The volume cap amount available for 16 tax credits allowed under sections 25F and 45BB of the 17 Internal Revenue Code of 1986, as added by this Act, shall 18 be $2,000,000,000 annually, beginning for taxable years 19 beginning in 2024 and for each succeeding calendar year 20 thereafter. 21 (b) APPLICATION FOR CREDITS.—The Secretary 22 shall develop a system to track a [Text truncated for display. Full text available on Congress.gov.]

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